Category Captains 2022

2022

CATEGORY CAPTAINS

An Industry Leadership Supplement from Canadian Grocer

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Vanessa Peters vpeters@ensembleiq.com

ART DIRECTOR

Trinh Phipps

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Michael Kimpton mkimpton@ensembleiq.com

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Sandra Parente sparente@ensembleiq.com

VICE PRESIDENT, EVENTS Megan Judkins mjudkins@ensembleiq.com

SENIOR DIRECTOR, DIGITAL CANADA

& SPECIAL PROJECTS

Valerie White vwhite@ensembleiq.com

SALES

NATIONAL ACCOUNT MANAGER

Katherine Frederick kfrederick@ensembleiq.com

ACCOUNT MANAGER

Karishma Rajani krajani@ensembleiq.com

SALES COORDINATOR

Juan Chacon jchacon@ensembleiq.com

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Commercial Bread is a large grocery category and plays a significant role at retail with $3.0 billion in sales for the latest 52 weeks and sales growth of +3% and gaining over $94 million in Canada1

Higher Health—comprised of grains, dietary needs (weight management, no fat, no sugar, and gluten free) and organic breads—is the largest segment in Commercial Bread with 19% dollar share, followed by White Bread at 18%, Buns & Rolls at 18%, and Breakfast at 16%. These four major segments account for 70% of the Commercial Bread category.1

Higher Health is the segment that supports consumers’ growing awareness and demand for healthy, nutritious and “better-for-you” products. 1 NielsenIQ MarketTrack

New product innovation plays a key factor in category growth and innovation is coming mainly from the Higher Health*, Buns & Rolls and Flatbread segments.

In the L52W period ending July 2, 2022, the Total Tomato category is valued at $255.2M dollars and experiencing declines of -2.5% (sales) and -7.5% (tonnage); and the Canned Tomato category is valued at $92.4M and is also showing declines of -3.6% and -7.2% in sales and tonnage respectively. Diced, ground + cut continues to be the largest segment, contributing 23% of category sales. Private label contributes 26% and is in decline (-3.1% sales & -7.6% tonnage) with the lowest average retail. All segments are also in decline, except for Sauce and Peeled which are relatively flat; and Passata, the fastest growing segment at +7.6% sales and -8.3% tonnage led by an imported brand, followed by Crushed at +3.4% sales and +1.6% tonnage. Quality is becoming increasingly important to consumers in the Total Tomato Category, as we see consumers paying double the price for a premium Italian brand over a value brand. This trading up is a key driver for the category value growth.

In the L6M same period, the Total Tomato category is valued at $130.2M and is showing growth in sales (+3%); and the Canned Tomato category is valued at $46.6M and experiencing growth at +3.8% (sales) and +4.9% (tonnage). As consumers begin entertaining in the home again, the category is growing in sales by 3%, with promotional levels at 51%, +3.5 pts, to help consumers mitigate increasing retails (+4.7%).1

More than ever, spending power is being pressured by inflation, as consumption increases in the L6M as consumers feel the impact of rising food prices on their wallets in the first half of 2022. The preference for authentic Italian products and brands, continues to increase as the ever-growing interest in premium food favours new consumption habits in the canned tomatoes category.

Mornings Just

Coffee is a $1.4B category in Canada and is found in just over 80% of households. Over the last year, coffee manufacturers, retailers, and consumers have all been impacted as the world reacclimatizes post-lockdown. In-home coffee consumption was faced with two major headwinds.

First, the end of prolonged lockdown periods, and the relaxing of social distancing mandates suggested a shift back in coffee consumption from in-home to away-fromhome. Category household penetration reached a three-year high at the peak of the pandemic in 2020 at 80%. However, despite the reopening of away-from-home channels, retail Coffee has maintained its HHP into 2022.

Second, rising coffee commodity prices has seen an increase in coffee prices at retail. Price per ton for retail coffee has grown by 10% over the past two years. Yet, Coffee category sales are flat vs. previous year and up +3% vs. 2YA Time and time again, Canadians have shown that they are willing to pay more for their daily cup of joe.

The Coffee category in Canada has proven to be a resilient one. With more and more format and flavour innovation hitting shelves, the outlook on the Coffee category is optimistic.

1 NielsenIQ Market Track, National GR+DR+MM, Coffee, Period Ending August 20, 2022

2 Nielsen Factbook, Coffee, Period Ending April 2, 2022

NEW Renée’s Dips

• Renée’s accounts for 74% of the refrigerated dressings category.

• The Renée’s brand scores #1 in key category attributes: tastes fresh; tastes more like homemade.

• Made with real vegetables and herbs and absolutely no artificial flavours, colours or preservatives.

DIPS

Dips is a large and mature category within Canada, driving $406.7MM in $POS sales in the latest 52 weeks growing +3% vs. previous year (PY) 1. Dips is divided into two main segments, Mediterranean (58% of total) and Non-Mediterranean dips (42% of total), with brands competing against each other through shelf-stable, produce, dairy and other subsegments1

Within the sub-segments, Non-Mediterranean Dairy Dips contributes to approximately 47% of the total category1. Shelf-stable (+2% lbs vs. PY) and Deli (+4% lbs vs. PY) Dips have seen increased consumption in L52W despite inflationary price hikes1. As consumer interest weighs towards products prioritizing in freshness, convenience, and versatility, these subsegments have benefited greatly2 Specifically, within Refrigerated Produce Dips, consumers are more health conscious than other dips consumers and are more likely to avoid unrecognizable ingredients and products that contain artificial colours, flavours, or preservatives2. Beyond health claims, consumers value flavour exploration within the Dips category, as nearly 40% of dips consumers enjoy trying new varieties to make their food more exciting3

1 NielsenIQ Market Track National GR+DR+MM, Dips CIP, L52W Period Ending September 17, 2022

2 Bonnett, M. (2022, September 20). Dips and Savory Spreads - US - 2022. Retrieved from Mintel: https://reports.mintel.com/ display/1126501/

3 Riebe, S. (2022, August). Trending on US menus: sauces, dips & spreads. Retrieved from Mintel: https://clients.mintel. com/insight/trending-onus-menus-sauces-dipsspreads-3?fromSearch=%3F freetext%3Dveggie%2520di p&resultPosition=1

be KD

Dry Packaged Dinners (DPD) is a large and mature category of $262MM that spans across several sub-segments. DPD has shown growth with 2.54% CAGR over the last 2 years1, as it has proven to be a popular meal option while consumers ate out less and consumed more meals at home2. Canadians are consuming and preparing meals differently with seven out of 10 consumers prepping and cooking dinner under 30 minutes with 50% of all food and beverage choices motivated by the convenienceoriented trend3.

Macaroni & Cheese represents a whopping 70% of the DPD category sales with an average household penetration of 52.2% over the last two years4. In the last 52 weeks, DPD delivered over $260.4MM, up +17.7% compared to the year before. Macaroni & Cheese is driving this trend, growing +21.6% YOY behind the launch and growth of the new Cheetos line. Consumers are primarily loyal to the method of preparation they are used to (i.e. microwave vs. stovetop) driving low interaction between different formats. Macaroni & Cheese packaged meals also have a high degree of impulse for grocery categories with a split of 37% for unplanned purchases and 63% for planned purchases5.

1 NielsenIQ MarketTrack Data

– L52W Period Ending August 2022

2 Kraft Heinz Shopper Data, “Interaction between Product Groups as a function of Customers”, L52W March 2021

3 NPD Food Service Trends 2018. IPSOS Lumiere Study

4 KHC NielsenIQ Homescan Factbook L52W Period Ending Jul 02 22

5 IPSOS Lumiere Study. NielsenIQ Market Track Nat xNfld GB+DR+MM 2018.

The average Canadian consumer enjoys 12.5 kilograms of cheese each year.1 Combined with the fact that category penetration sits at 95%2, cheese continues to be an important category for consumers and retailers alike. Moreover, 35% of consumers state they are consuming more cheese now than prior to the start of the pandemic.3

While most cheese production occurs within the European Union and the United States4, Canadian production continues to increase year over year; estimated to be around 540,000 metric tons in 2021.5

This growth, combined with the economic pressures of world (i.e. import and container costs, inflation, etc.), has allowed for more “local” Canadian brands to shine. Imported specialty cheeses continue to make their way into stores, but a Canadian-made specialty cheese at a fraction of the price resonates with those cost-conscious consumers.

Cheese continues to be a flexible ingredient for many. Available in an array of formats, flavours and sharpness, retailers and consumers will cheese the day!

1 Statista, Cheese Market in Canada, May 2022.

2 Mintel, Cheese - Canada, June 2022.

4 Statista, Cheese Market in Canada, May 2022.

5 Ibid.

ABOUT

Supermarkets should have a greater range of cheeses from local producers.

I often seek out different types of cheese. 379

16% 49% 35% 65%

I’m eating more cheese now than compared to before the start of the pandemic (March 2020) 84% 65% 35%

51%

Disagree 6,206 10, 350 1,075 790 544 540 505 448 390 360 355 387 401 400 404 408 405 424 421 433 446 476 497 510 515 523 540 550

Frozen Food is increasingly gaining traction amongst Canadians as lifestyles and preferences evolve. Once known as a stagnant category, Frozen Food has transformed into a prominent staple in Canadian households with 98.6% households purchasing.1 A variety of offerings appeal to all types of consumers from the meat lovers to flexitarians.

Convenience is the main motivation behind purchasing Frozen with 55% of Canadians eating Frozen because of the quicker cook time2 (under 30-minute dinner prep rising +0.4%)3. With the average work week 10% longer than the start of the pandemic4, more Canadians are opting for quick and cost-efficient foods.

Nearly 80% of Frozen Food is consumed at home5 with dinners and entrees the largest category in Frozen contributing to approximately 30% of overall Frozen sales6. Young families and empty nesters are the dominant purchasers of the category driving growth in multi-serve meals prepared for families and single serve meals for small households. With empty nester baby boomers the largest portion of the population (25%) and millennial young families the fastest growing population (+9%)7, it is predicted that the Frozen category will continue to grow and evolve for years to come.

1 NielsenIQ Homescan L52W Period Ending May 21 2022

2 Mintel Time and the Future of Food 2021

3 Ipsos FIVE L52W Period Ending Aug 2021 vs PrePandemic Period L52W Period Ending Aug 2019

4 Statistia Remote Work in Canada 2022

5 IPSOS FIVE data L52W Period Ending June 2022 vs June 2019

6 NielsenIQ Market Track National All Channel incl. NFLD. L52W Period Ending May 21 2022

7 StatsCan Demographic Population 2016-2021

From floods to forest fires, the effects of climate change are, unfortunately, constant. Sustainability is a much-discussed sub-topic, primarily around how consumers can support the environment through their purchases. In fact, almost three-quarters of all consumers believe that sustainability is an important consideration when buying a product.1

Products considered sustainable:2

• Do not deplete natural, non-renewable resources

• Do not directly harm the environment

• Are not made in a socially irresponsible way

Sustainably marketed products represented one-thirdof all CPG growth between 2015– 2021,3 and are outpacing the growth rate of their conventional counterparts by 2.7 times.3

As consumers commit to more sustainable purchases, innovation carrying third party certifications are beneficial. Not only does third party certification promote a company’s sustainability efforts, but it also assists in building consumer confidence.

Sustainability will remain important for consumers and retailers alike. Consumers are making an intentional shift for the environment and retailers see larger basket rings as there exists a sizable price premium over conventional counterparts of 28%.3

1 IRI Omniconsumer Survey Solutions June 2022 n=764

2 Earth Media Partners, 2022. “What makes a product sustainable,” earth911.com

3 IRI POS Data for MultiOutlet across 36 core categories, analysis by NYU Stern Center for Sustainable Business

Sustainability Marketed 6 Year CAGR: 7.34%

Total Market 6 Year CAGR: 3.45%

Conventionally Marketed 6 Year CAGR: 2.76%

Peanut Butter remains a pantry staple, reaching $306 million in annual sales. The category experienced inflationary growth in dollar sales +0.3%, while tonnage volume declined -5%.1

The Regular (stabilized) Peanut Butter segment makes up about 79% of sales in the category, maintainig dollar sales vs. year ago. Natural Peanut Butter, representing 21% of the category, drives momentum with +3% growth as consumers seek a wide variety of Peanut Butter. The main subsegments include Creamy, representing 67% of category sales, Crunchy (19%), Light (12%), and Dark Roast (2%).1

With a household penetration of 75%, Peanut Butter offers Canadians a convenient comfort snack and meal.2 Peanut Butter provides flexibility with numerous usage occasions – in smoothies, paired with fruit, or in a classic PB&J sandwich. Daily at-home consumption and maintaining a full pantry has become the new normal.3 As consumer behaviour shifts, retailers should ensure shelving planograms display extensive Peanut Butter varieties to meet all consumer needs.

1 NielsenIQ MarketTrack, National All Channels, L52W Period Ending July 16, 2022

2 Numerator Panel, L52W Period Ending July 16, 2022

3 Deloitte, The Future of Food: A Canadian Perspective – Fresh, Focused, and Sustainable – The Role of the Grocery Store 2021

PREMIUM MIXERS

Premium Mixers is an exciting and quickly growing category, almost doubling at +95% between 2019 and 20221. The premium category, worth over $23M1, drives value back into a beverage category where margins are typically razor-thin. Rapid premiumization has been evident as Canadian consumers seek to mix premium mixers with high-quality spirits. These include tonics, ginger beers, ginger ales, and sodas to create world-class, restaurant-quality drinks that are delicious and easy to make at home.

An indication of the future potential for the Premium Mixers category lies in the projected market split of the Premium Spirits category vs. Standard Spirits. In 2021 Premium Spirits accounted for 30% of the total Spirits market, but this number is expected to grow to an impressive 40% by 20252. As the acceleration of consumers to trade up with their spirits continues, they will also be eager to do the same with their mixer. This behaviour lends to a significant opportunity for retailers to designate premium shelf and display space to a fastgrowing category and earn more profit.

1 NielsenIQ Data Total Canada L52W Period Ending June 18,2022 & L52W Period Ending June 22, 2019

2 IWSR 2021 Actuals, IWSR 2022-2025 Estimates, (Exchange Rate used 1.32 accurate as of Sept 15, 2022)