Kristin Harris Pawel Jastrzebski Lindsay Haizman Bart Grochowski Joshua Israileff

Roundy’s Checkstand Confections

Category Review

June 7, 2010

Agenda

• Confections Industry and Trends• Roundy’s and Wrigley Mission Statements• Category Definition and Role• Category Assessment• Category Scorecard• Category Strategy• Roundy’s Tactics• Summary

Industry at a Glance

Source: First Research Industry Profile, Candy Industry, April 12, 2010

•U.S. confection companies - $16 billion annual revenue

•1,600 companies

•Largest 50 companies hold less than 40% of market

•Biggest companies:

Grocery at a Glance

Source: Phil Lempert, Supermarket Guru, Nielsen Wire

• Average trip is 22 minutes (Wall Street Journal)

• $27.61- sales per customer transaction in 2008

• Weekly Household Grocery Expenses 2009

• Total: $98.40

• Size of HH:

1 $72.40

2 $91.90

3-4 $108.90

5 or more $145.90

Checkstand at a Glance

Source: progressivegrocer.com

•Fast last impression

•2 minutes and 52 seconds

•Checkout experience

•80% used to determine to return

•Only 17% bought something in line

•“100% go through the checkout”

•Fewer than 1 in 10 shoppers make a purchase

•Very important to get Checkstand RIGHT!

*2

Macro Trends

Grocery Trends

Source: Food Marketing Institute, fmi.org

Stage 1

Restaurant to Supermarket

Stage 2

Shifting Mix

Stage 3

Shifting Channels

•Saving money on eating out

•Fine dining to fast food

•Cutting back on eating eat

•Shift to supercenters

•Limited assortment

•Pantry leveraging

•More private label

•More coupons, planned trips

•Fresh to frozen

Confections Trends

Source: Phil Lempert, Supermarket Guru, Nielsen Wire

•76% - bored with products

•Want new innovation

•Snicker’s Peanut Butter Squared

•“Better for You” Products

•Sugarless Gum

•$1.14 billion sales in 2009

•Wrigley’s Orbit - American Dental Association Seal of Approval

Confections and the Recession

• 86% of consumers eat chocolate everyday = happiness• 16.2% chocolate jump in sales in North America (YA)

– Personal branding which has returned consumers to purchase

• Themes of Consumers today

Source: www.candyindustry.com

Simplicity Comfort Health

•Simple, Old-style labels

•Easy to recognize

•Chocolate - Ultimate comfort product

•Organic

•Natural Ingredients

•“Darker” chocolate

*3

Roundy’s and Wrigley

Working Together

Mission Statements

•Headquarters - Milwaukee, WI

•151 locations in Wisconsin and Minnesota

•More than 17,000 employees

•Founded in 1872

•One of oldest and largest retailers in Midwest

•Pick N’ Save, Rainbow Foods, Copps Food Center, Metro Market

•Currently building store in Arlington Heights, IL

•Under the Metro Market banner, but not the name

•Annual revenue approaching $4 billion

•Competition continues to grow

•January 2009 - Outstanding Regional retailer, Progressive Grocer

Source: Roundys.com, May 2010 *4

Roundy’s Mission StatementRoundy’s Understands the lifestyle needs of consumers better than anyone…We are an innovative company that:

•Takes care of the customer, whatever it takes

•Values our employees’ talents and skills

•Is known for integrity in all of our work

•Wins the hearts and minds of customers, employees, suppliers and partners

•Involves and inspires all stakeholders to do their very best

Source: Roundys.com May 2010 *5

Wrigley Commitment

“We are committed to preserving the heritage and values of the Wrigley Company…We also need to nurture the communities in which we work, and nurture our environment and broader, global community.”

Source: Wrigley.com, May 2010

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Checkstand Confections

Definition and Role

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Category Definition

Source: Michael John Ang, Wrigley 2010

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Immediate ConsumptionConfectionery

Fun Gum/Candy

ConfectionsGum / Mints Chocolate

TYPEFun Gum

Brand

Authentic Favorites

Form / Flavor

TYPEHard

TYPEChewy / Gummy

Brand Brand

Form / Flavor Form / Flavor

Oral Care / Functional

Everyday Chewing

Intense

Brand Brand

FlavorFlavor

TYPEFun Candy Conf/ Lolli

Brand

Form / Flavor

Brand

Flavor

Mainstream

Brand

Bottles

Contemporary

Brand

Flavor Flavor

Mints

Taste Breath

Freshening

Everyday Intense

Premium Mainstream

BrandBrand

Flavor/Filling Flavor/Filling

Pack Size

Category Definition

Source: Michael John Ang, Wrigley 2010

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Immediate Consumption Confectionery

Fun Gum / Candy Confections

TYPEFun Gum

Brand

Form / Flavor

TYPEHard

TYPEChewy / Gummy

Brand Brand

Form / Flavor Form / Flavor

TYPEFun Candy Confections/Lolli

Brand

Form / Flavor

Pack size

*Key Brands: Bubblicious, Hubba Bubba Charms, Tootsie Rolls, Air Heads Life Savers, Crème Savers, Werthers Skittles, Starburst, Twizzlers

Category Role

Confections

•Emotional (reward, craving, comfort, fun, etc.)

•Physical (hunger, mouth freshening, keep busy)

•Incremental Dollars - Builds the basket

•Frequent buyers

•Expandable - the more you have the more you use

Source: DePaul University, Laura Lee Larson, Eh.D.

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Category Definition and Role

Checkstand Confections

•Reward

•Treat for self or kids

•Impulse item

•Convenience

•Immediate Consumption

•Increases in market basket

•Increased profits through higher margin items

•Basket - $8.25 more with confection

Source: DePaul University, Laura Lee Larson, Eh.D.

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Pick N’ Save

Milwaukee, Wisconsin

Category Assessment

Aging Population

•By 2030, 1 in 5 Americans will be 65+

•Most live 25+ more years

•Largest generation in history

•Boomers

•Wealthiest generation in history

•Expendable income to enjoy life

•U.S. spend $1 trillion more than all under 45

Source: Food Marketing Institute, fmi.org

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*6

Roundy’s Consumer SummaryKey Demographics

Source: Nielsen Spectra, 2009

Median Income $58,095

Occupational White Collar

Household’s• Children• No Children

34%66%

Ethnicity• White• Black• Hispanic• Other

84.9%7.0%4.2%3.9%

Educational Level College Graduate

ClustersAffluent Suburban Spreads

Roundy’s Behavior-Scape Framework

Source: Nielsen Spectra, September 2009

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Wrigley SWOT Analysis

Category Scorecard

Checkout Total Market Share

•Gum & Mints: 38.9%

•Chocolate: 38.9%

•Non-Chocolate: 41.8%

Source: Nielsen Answers w/e 5/15/10

Roundy’s Checkout Sales

Source: Nielsen Answers w/e 5/15/10

Non-Chocolate6%

Gum & Mints48%Chocolate

46%

•Gum & Mints and Chocolate carry the checkstand category sales

Source: Nielsen Answers w/e 5/15/10

Top Brands

*7

Source: Candy Checkout Spreadsheet Data

Top Chocolate based on SPPD

Source: Candy Checkout Spreadsheet Data

Top Non-Chocolate based on SPPD

Source: Candy Checkout Spreadsheet Data

Top Gum & Mints based on SPPD

Source: Nielsen Answers w/e 5/15/10

Total Sales % Change Candy CheckstandChocolate Non-Chocolate Gum & Mints

Total $ sales: $4,848,680

Increase 18.9%

RM $ sales: +6.6%

Total $ sales: $604,219

Increase 1.4%

RM $ sales: -20.0%

Total $ sales: $5,090,659

Increase 6.6%

RM $ sales: +2.5%

*8

Category Strategy

Roundy’s In-Store Research

•Non-chocolate at feet level, away from first glance

•Non-chocolate mixed in with chocolate

•Nerds Rope takes up space of 2-3 products

•Many products mix-matched and hard to find or recognize

Source: Pick N’ Save Store # 6850, Kenosha, WI

Shelf Space vs. $ Sales by Category

•Gum & Mints outsells shelf space

•Non-chocolate space significantly higher than sales

Source: Nielsen Spaceman Data

Recommendations

•Move better performing non-chocolate to higher shelves

•Move some chocolate further down shelf

•Addition of the following products (tactics)

•Freedent

•AirHeads

•Switched out Pearsons Nut Role 1.8 oz for 2.2 oz

•Deletion of the following products (tactics)

•Nerds Rope

•Dove Peanut Butter Singles

•Cherry Push Pop

•Continue up-keep of well performing Gum & Mints as well as over-the-belt

*9

Adjustments to Customer Right

Current Mints

Current Chocolate

ChocolateNon-

Chocolate

Reasoning•Non-chocolate now has a specific location, easy to locate

•Chocolate placed in one area, easy to locate

•SKU rationalization

•Add top selling products from RM to increase market share

•Maximize space for more SKUs, higher SPPD

•Current chocolate- keep top selling items at customer eye-level

Pick N’ Save Tactics

Tactics Opportunities

Overview•Aging population

•Freedent

•“Classic chocolates”

•Old-style packaging

•Simplicity

•More shoppable

•Easy to find products - categorized based on subcategory

•“Better for you” products

•Dark chocolate

•Healthier ingredients

•Sugar-free gum

•Dental gum - Wrigley Orbit American Dental Association approved

Source: Nielsen Spaceman

New Shelving Overview

*10

Source: Nielsen Spaceman

Current Customer Right New Customer Right

Source: Nielsen Spaceman

Current Over-the-Belt New Over-the-Belt

*12

Summary

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Summary of Roundy’s Findings

•Analysis from:

•Trends

•Customer demographics

•Market performance

•Power of brands and consumer

•Maximize shelf space in customer right

•Additions of products suitable for consumers

•SKU rationalization with impact

•Simplified shopping experience

•Even out space to sales

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Next Steps

•Test out in clustered stores

•Run a test run of proposed changes to further review for future implementation

•Allow customers to be able to see the proposed changes and adapt

•Positive findings

•Implement into stores market wide

•Allow customers to have complete variety

•Allow for time for customers to adapt