Creating the Land of Milk and Honey

Creating the land of milk and
honey
Dairy Trends and opportunities to guide
growth
IDFA – January 2017

Overall, the milk category is declining but that isn’t the
whole story
CONFIDENTIAL C. Gretchko/2017-01-31

Key words: healthy, calcium, nutritious & tasty
Consumers still have a positive view of milk

Commodity and wall of sameness

One size doesn’t fit all
Elderly
becoming more important
• xxx
People’s lifestyles
Have changed
More women
responsible for households
Millenials
Senior people with
specific needs to be
Addressed. Average
life expectancy
increasing across
Americas.
They represent 32%
of the world’s population.
27% of North American
population. People
connected 24/7,
looking for convenient
and healthy products.
More women in the
workforce with
multiple activities
Between their job
and their household,
looking for convenient
and healthy products.
Household size is
decreasing along
With birth rate.
No “normal” family
composition. Presence
of children justifies
premium products.
Source: Mintel, Roper Report from GFK, Passport

Source: Dairy U&A USA 2016 Online blogs + Focus Groups. 700 interviews, national representation, among men (20%) and woman (80%) from 21 to 55 years old
Not just whole, skim and fat free...Value Added and Organic are now
“mainstream”
The dairy market is not what it used to be
11%
6%64%
Value-Added
Natural
Conventional 6%
6%
3%
2%

Conventional Users
Value-Added Users
Natural Users
Read online reviews
Brand name indicates quality
Buy based on quality, not price
Concerned about
environment
I enjoy
wandering the
store
Like to share
my opinions
Store must offers discounts
If product made by
company I trust, buy
even if more expensive
Always base decisions on reviews
Save as much
money as
possible
When find a brand
I like, I stick to it
Buy healthiest products
Lifestyle Profile: Biplot

Conventional Users
Value-Added Users
Natural Users
Read online reviews
Brand name indicates quality
Buy based on quality, not price
Concerned about
environment
I enjoy
wandering the
store
Like to share
my opinions
Store must offers discounts
If product made by
company I trust, buy
even if more expensive
Always base decisions on reviews
Save as much
money as
possible
When find a brand
I like, I stick to it
Buy healthiest products
Lifestyle Profile: Biplot
For the most part the segments are divided based on price:
Conventional users are very price focused while
Value-Added and Natural will spend more to get quality.

Demographic Profile
21
79
78 A
21
67 A
33
43 A
$93.3 AB
20
14
39
27 A
10
26
65 AB
31. Ab
28 A
41 AB
31
40
73
5
11 AB
8 A
12
PersonalDemographicsHouseholdDemographics
Conventional Users
(305)
A
%
GENDER Male
Female
EMPLOYMENT? Yes
No (Net)
MARRIED? Yes
No
CHILDREN? Yes
No
REGION
INCOME Mean (in $000)
Northeast
Midwest
South
West
HOUSEHOLD SIZE 1
2
3 or more (Net)
Mean
AGE 21-34
35-44
45-55
Mean
ETHNICITY White
African-American
Asian/Pacific Islander
Hispanic/Latino
Full-time parent/Homemaker
20
80
67
33 BC
55
45 C
28
$70.5
17
27 BC
36
19
21 BC
27
53
2.8
20
28
52 BC
43 BC
86 BC
5
3
4
15 B
20
80
76 A
22
61
39
37 A
$73.3
19
19
39
23
13
33
54
2.9
40 AC
31
29
38
74
7
4
12 A
7
Value-Added Users
(202)
B
%
Natural Users
(204)
C
%
Base: Total Respondents
Multiple Demographic Questions
Letters indicate differences at the 95% (uppercase)
and 90% (lowercase) confidence levels.

Demographic Profile
21
79
78 A
21
67 A
33
43 A
$93.3 AB
20
14
39
27 A
10
26
65 AB
31. Ab
28 A
41 AB
31
40
73
5
11 AB
8 A
12
PersonalDemographicsHouseholdDemographics
Conventional Users
(305)
A
%
GENDER Male
Female
EMPLOYMENT? Yes
No (Net)
MARRIED? Yes
No
CHILDREN? Yes
No
REGION
INCOME Mean (in $000)
Northeast
Midwest
South
West
HOUSEHOLD SIZE 1
2
3 or more (Net)
Mean
AGE 21-34
35-44
45-55
Mean
ETHNICITY White
African-American
Asian/Pacific Islander
Hispanic/Latino
Full-time parent/Homemaker
20
80
67
33 BC
55
45 C
28
$70.5
17
27 BC
36
19
21 BC
27
53
2.8
20
28
52 BC
43 BC
86 BC
5
3
4
15 B
20
80
76 A
22
61
39
37 A
$73.3
19
19
39
23
13
33
54
2.9
40 AC
31
29
38
74
7
4
12 A
7
Value-Added Users
(202)
B
%
Natural Users
(204)
C
%
Multiple Demographic Questions
Letters indicate differences at the 95% (uppercase)
and 90% (lowercase) confidence levels.
Conventional users tend to be older and more likely white.
Value-Added and Natural users skew younger
and are more likely to attract different ethnicities.
Natural users have higher incomes and larger families.

Conventional Users Value-Added Users Natural Users
(305)
A
%
(202)
B
%
(204)
C
%
Beverages Purchased in Past 2 Weeks
White dairy milk
Carbonated soft drinks
Juice/Juice Drinks
Water (bottled, sparkling, or flavored)
Ready to drink chocolate/flavored milk
Alternative non-dairy milk
Organic Usage
Primarily Non-Organic
Combination
Primarily Organic
100%
54%
75% B
69%
34% a
47% Ab
13%
72% AB
17% A
100%
71% C
64%
70%
32%
38% A
41% C
46%
15% A
100%
73% C
69%
66%
26%
19%
59% BC
42%
2%
Primarily Organic defined as those who buy Organic for at least 6 categories; Primarily Non-Organic defined as those who buy Non-Organic for at least 6 categories;
Combination defined as those who buy Both organic and non-organic for at least 6 categories
QA. Which of the following products, if any, have you bought for you or your family in the past two weeks?
QA2. For each type of food/beverage, please indicate if you consume an organic version or if you consume a non-organic version.
Letters indicate differences at the 95% (uppercase) and 90% (lowercase) confidence levels.
Food & Beverage Consumption

Conventional Users Value-Added Users Natural Users
(305)
A
%
(202)
B
%
(204)
C
%
Beverages Purchased in Past 2 Weeks
White dairy milk
Carbonated soft drinks
Juice/Juice Drinks
Water (bottled, sparkling, or flavored)
Ready to drink chocolate/flavored milk
Alternative non-dairy milk
Organic Usage
Primarily Non-Organic
Combination
Primarily Organic
100%
54%
75% B
69%
34% a
47% Ab
13%
72% AB
17% A
100%
71% C
64%
70%
32%
38% A
41% C
46%
15% A
100%
73% C
69%
66%
26%
19%
59% BC
42%
2%
Primarily Organic defined as those who buy Organic for at least 6 categories; Primarily Non-Organic defined as those who buy Non-Organic for at least 6 categories;
Combination defined as those who buy Both organic and non-organic for at least 6 categories
QA. Which of the following products, if any, have you bought for you or your family in the past two weeks?
QA2. For each type of food/beverage, please indicate if you consume an organic version or if you consume a non-organic version.
Letters indicate differences at the 95% (uppercase) and 90% (lowercase) confidence levels.
Food & Beverage Consumption
Natural users are most likely to buy a combination of Organic
and Non-Organic foods as well as dairy alternatives.
Conventional users are the least likely to buy organic and
dairy alternatives.

Natural Users
CARDBOARD
40%PURCHASE
68% - easy storage
58% - recyclable
46% - protects milk
42% - easy to open/close
41% - secure cap
Advantages
27% - not easy to hold
15% - no convenient cap
14% - spoils sooner
11% - too small
10% - not for kids
Disadvantages
Container Material Type Pros & Cons by Segment
Conventional Users
PLASTIC
96%PURCHASE
59% - easy to pour
59% - recyclable
57% - easy storage
55% - easy to hold
Advantages
20% - spoils sooner
14% - not for kids
13% - too big
11% - milk not as fresh
6% - not easy pour/hold
Disadvantages
Value-Added Users
PLASTIC
75%PURCHASE
53% - easy storage
53% - recyclable
50% - secure cap
44% - easy to pour
Advantages
23% - spoils sooner
19% - too big
15% - not for kids
13% - milk tastes funny
Disadvantages
Natural Users
PLASTIC
54%PURCHASE
65% - recyclable
54% - does not leak
51% - easy storage
49% - secure cap
Advantages
15% - spoils sooner
11% - too big
8% - not for kids
Disadvantages
Base: Material Type Typically Purchased
Q2c. Which of the following, if any, do you feel are the main advantages/disadvantages of having a milk container made from [material]?

Natural Users
CARDBOARD
40%PURCHASE
68% - easy storage
58% - recyclable
46% - protects milk
41% - secure cap
Advantages
27% - not easy to hold
15% - no convenient cap
14% - spoils sooner
11% - too small
10% - not for kids
Disadvantages
Container Material Type Pros & Cons by Segment
Conventional Users
PLASTIC
96%PURCHASE
59% - easy to pour
59% - recyclable
57% - easy storage
55% - easy to hold
Advantages
20% - spoils sooner
14% - not for kids
13% - too big
6% - not easy pour/hold
Disadvantages
Value-Added Users
PLASTIC
75%PURCHASE
53% - easy storage
53% - recyclable
50% - secure cap
44% - easy to pour
Advantages
23% - spoils sooner
19% - too big
15% - not for kids
Disadvantages
Natural Users
PLASTIC
54%PURCHASE
65% - recyclable
54% - does not leak
51% - easy storage
49% - secure cap
Advantages
15% - spoils sooner
11% - too big
8% - not for kids
Disadvantages
Base: Material Type Typically Purchased
Q2c. Which of the following, if any, do you feel are the main advantages/disadvantages of having a milk container made from [material]?
While plastic scores high for functionality, its main
disadvantage includes protection and waste.
Natural users associate cartons with protection.

Natural products, better nutritional benefits AND offer new experiences
Consumer motivations: what bring people back to milk?
Make it all
natural
More
protein
New
flavors
Make it
really
digestible
Different
smell/taste
“What would bring you back to milk?”
More
calcium

Stretching within categories
Stretch to stay relevant and differentiated
The opportunity
Tastes
Occasions
Lifestyles
Natural/Environmental views

On-going expansion of choices…last year,
last month, last week, an hour ago
Texture, shapes, types
“Milk”
Source, regions, delivery systems
Occasions, Benefits

‘Lest the milk to become a natural part
of a balanced diet and active and
healthy lifestyle’‘Arla Protein’: Protein milk, before & after exercise
Arla, Sweden
Rethink what milk is good at and for whom

CAL+ LOW FAT WHOLE FAT LACTO-
TRANSFERRINE
SENIOR CAL+ SENIOR
REDUCE
CHOLESTEROL
Plant Sterol
Yili ShuHua, China
Rethink big groups of milk users – seniors staying fit
Package: TBA250
“Shuhua” Lactose Free WM

“Future Star” Kids WM, FM, Yogurt
BRAIN HEALTHY
DHA+Taurine
BONE HEALTHY
DHA+VA VD
3-6 TODDLER
DHA+Lutein+ Egg yolk
powder + Probiotic
ORGANIC
AMBIENT
YOGURT
WALNUT FM STRAWBERRY FM
Mengniu Future Star, China
Rethink powering children to be their best
Packages: TBA200/TPA200/TBA125

Lactogal, Portugal
Rethink milk as the one a day vitamin
BONES
Calcium +
Vitamin D
DIGESTION
Fiber
MILK
INTOLERANCE
Reduced /
lactose free
KIDS
GROWTH
1-3 year old HEART
Omega3, EPA
& DHA
Nutrition
milk + juice
INDULGENCE
Flavored milk light
Packages: Tetra Evero 1L, TBA Edge 1L LC, TBA 200 Slim straw

‘BI frutas’ - Milk drink w/ fruit juice
Pascual, Spain
Rethink milk as refreshing
Packages: TGA 1L SQ HC, TPA 200/330 SQ PullTab

‘Quinoa e linhaça’ & ‘Linhaça amaranto e chia’ – Milk drink w/ cereals & grains
Piracanjuba, Brazil
Rethink milk as the base for “drinks”
Package: TBA Edge 200 HC
Time is
precious
‘Nutritional choice for young adults who are keen to feel and look healthy’

Valio (Hungary)
Cooking cream range
In TBA 250 Edge HC
Parmalat (Russia)
Liquid ultra pasteurized cream sauce:
coffee & cooking cream
In TBA Edge 200 HC & 1000 ml
Rethink how it is used vs. what it is

E-Commerce is changing the game
Rethink the grocery store
USA number 1 market in USD/person
Increased demand for stable distribution
2006 2008 2010 2012 2014
$5
$8
$12
$17
$25
U.S. Online CPG Sales ($ Billions)
2011 – 2014 CAGR:
est. 25% - 30%
2006 – 2010 CAGR:
20% - 25%

While meeting modern consumer needs is key
Capitalizing on Milk’s Healthy Halo
Understanding and delivering exactly what consumers want, and
knowing how best to reach them can help the dairy industry to
maximize performance
Consumers already believe that milk ‘is good for you’. Now they are
ready for products that deliver both health & lifestyle benefits in a
simple and convenient form
Milk sits at the point where healthy nutrition and convenient drinks
and snacks meet.
►Understanding and delivering exactly what consumers want, and
knowing how best to reach them can help the dairy industry to
maximize performance
►Consumers already believe that milk ‘is good for you’. Now they are
ready for products that deliver both health & lifestyle benefits in a
simple and convenient form
►Milk sits at the point where healthy nutrition and convenient drinks
and snacks meet.

The key to energizing dairy is…
The essence of the ‘new good’ of milk
…to demonstrate that
this unique, versatile,
convenient,
customizable liquid
food can reach out to
young and old, by
constantly adapting to
meet their ever-
changing needs
3
…to show that it is
convenient,
pleasurable, a special
treat even, and
relevant to all
2
…to make consumers
excited about milk
1

Questions?

Creating the Land of Milk and Honey

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