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2015 Foodservice Perception Study Summary of findings from an online QuickStudy® conducted exclusively for NAG

Prepared by Study Hall Research 16 September 2015

Company background • • •

Headquartered in Tampa, Florida. 75+ years’ combined experience. Full-service qualitative and quantitative. •

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Global research capabilities; any market, any time. Extensive backgrounds in research, marketing communications, and brand & insights consulting. • •

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B2B; B2C; Internal/organizational.

A roster of regional, national and global brands. And a strong list of case studies to reinforce expertise.

And a fair amount of food & retail experience across broad categories and brands.

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Contents • Context for research • Methodology • Respondent behaviors/attitudes

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Study Overview

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Context for research • Study Hall Research has ongoing relationship with CSD.

• Foodservice and foodservice consumers an increasing area of emphasis.

• 2014 presentation of primary data from c-store customers and users of foodservice in competing categories.

• 2015 marks first ‘follow-up’ wave.

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Study objectives • On an ongoing basis, collect trackable data re: current foodservice behaviors

• Evaluate key usage and perceptual dimensions for CStores vs. key competitor categories • Grocery store • QSR

• New in 2015: fast casual

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Methodology/sample • Web-based online survey: • Random-sample national audience • Adults 18+ • Purchase prepared/ready to eat food from a C-Store, grocery store, fast food restaurant, or fast casual restaurants at least once per month. • A sample that represents key behaviors and potential incremental growth.

• Survey deployed during August 2015 • 672 complete responses, 942 responses total • 45 states represented

• Overall sample is statistically significant • 95% confidence interval; +/- 3.78% error rate 8

Goals for today 1. Share key findings from the study. But also…

2. Layer in important trends and insights we are seeing from our work in • • • • • • • •

QSR/fast food Fast casual Casual dining Taste testing Food development & ideation Supermarkets Polished casual And more…

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Respondent Behaviors & Attitudes

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Primary purchase location (2014) Where do you primarily purchase food that is prepared/ready to eat? 5.6%

37.3% 57%

Convenience Store Grocery Store Deli/Grab and Go Fast Food Restaurant

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Primary purchase location (2015) Where do you primarily purchase food that is prepared/ready to eat? 4.91%

20.98 42.11%

31.99% Convenience Store Grocery Store Deli/Grab and Go Fast Food Restaurant Fast Casual

A new category was added (fast casual), thus the percentages for all categories in 2015 dropped to accommodate the addition. However, convenience stores saw the smallest decline—a good sign for the future of foodservice at convenience stores.

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Purchase occasion preference (2015) I prefer to purchase food from the following locations for_____:

60.0%

56.25%

50.0% 40.0%

Percent

46.7%

46.7% 36.8% 36.01%

Convenience Store

30.0%

Grocery Store

23.2% 20.0%

19.5%

18.5% 14.0%

11.9% 10.0%

7.4%

6.4% 1.93%

1.0%

0.0% Breakfast

Lunch

Dinner

19.2%

10.3% 4.8% 4.5% 2.4% 1.04% Morning Snack

12.8% 8.6%

Fast Casual

6.7%

2.5% 0.60% 1.8%1.19% Afternoon Snack

Fast Food QSR

Late Night

2.98% Do not purchase here

A revised question from 2014 where respondents were forced to select only one location based on preference for occasion.

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Purchase occasion preference (2015) I prefer to purchase food from the following locations for_____:

60.0% 50.0%

Percent

40.0% Convenience Store

30.0%

Grocery Store Fast Food QSR

20.0%

Fast Casual

10.0% 0.0% Breakfast

Lunch

Dinner

Morning Snack

Afternoon Snack

Late Night

Do not purchase here

Convenience stores show strongest preference numbers in snacking and late night—a key growth area for QSR—but significant lags in lunch, dinner. A new category this year, late night, shows convenience stores leading consumer preferences. But huge opportunity to grow share from ‘do not purchase here.’

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Purchase occasion preference (2015) I prefer to purchase food from the following locations for_____:

25.0%

19.5%

20.0%

Percent

15.0%

Convenience Store Grocery Store

10.3%

Fast Food QSR

10.0%

5.0%

Fast Casual 4.8%

4.5% 2.5%

2.4%

1.04%

0.60%

0.0% Morning Snack

Afternoon Snack

Convenience stores clearly dominate the afternoon snack occasion.

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Related trends we are seeing •

Breakfast as target growth area—in more ways than one • Traditional (but better items) • Non-traditional - BSAD! • Other dayparts saturated • At present, breakfast = easier opportunity for standout.

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Snacking • Smaller items popping up at QSR • Taking advantage of ‘in-betweens’ to drive business • Value oriented

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Late nite • Not 4th meal, but sometimes 5th-6th-7th meal • And not always aligned with daypart (late nite isn’t always at night!)

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Piece-mealing • Multiple trips for one meal 16

Purchases past 30 days by store type (2015) What is the number of times you typically purchase food from a _______ in a typical 30 day period”

Location

Average # of days Total

Convenience Store

6.51

Grocery Store

11.36

Fast Food/QSR

10.20

Fast Casual

9.96

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Purchases past 30 days by store type (2015) What is the number of times you typically purchase food from a _______ in a typical 30 day period”

Location

Average # of days Total

Adults 18-34

Convenience Store

6.51

7.6

Grocery Store

11.36

12.4

Fast Food/QSR

10.20

10

Fast Casual

9.96

10.4

Visits from adults 18-34 to convenience stores, grocery stores and fast casual are higher than the population as a whole. These millennials represent a key target for convenience store growth—especially at the potential expense of QSR visits..

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Purchases past 30 days by store type (2015) What is the number of times you typically purchase food from a _______ in a typical 30 day period”

Location

Average # of days Total

Adults 18-34

Adults 35+

Convenience Store

6.51

7.6

6.1

Grocery Store

11.36

12.4

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Fast Food/QSR

10.20

10

10.3

Fast Casual

9.96

10.4

9.8

Conversely, visits from Adults 35+ trail the total population AND Millennials for all outlets but QSR.

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Purchase likelihood – beverages (2014) How likely are you to purchase ___________ at each of the following locations? 5.0

1=Strongly Disagree / 5=Strongly Agree

4.5 4.0

4.3

4.0

3.6

3.5 3.0

3.5

3.4

3.2 2.7

2.5

Convenience Store 2.4

2.3

Grocery Store Fast Food QSR

2.0

Fast Casual

1.5 1.0 0.5 0.0 Cold beverages from a dispenser (such as fountain soda, tea, fruit drinks, etc.)

Hot beverages (such as coffee, tea, hot chocolate, etc.)

Frozen beverages (such as, freezes, slushes, milkshakes, etc.)

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Purchase likelihood – beverages (2015) How likely are you to purchase ___________ at each of the following locations? 5.0

1=Strongly Disagree / 5=Strongly Agree

4.5 4.0

4.1

4.14

3.6

3.5

3.3

3.3

3.47

3.0 2.5

2.5

3.3

3.0

3.09 Convenience Store

2.4

2.2

2.0

Grocery Store Fast Food QSR Fast Casual

1.5 1.0 0.5 0.0 Cold beverages from a dispenser (such as fountain soda, tea, fruit drinks, etc.)

Hot beverages (such as coffee, tea, hot chocolate, etc.)

Frozen beverages (such as, freezes, slushes, milkshakes, etc.)

Across C-Store, grocery and QSR, beverage purchase likelihood dropped on almost every measure—potentially linked to increased incidence of ‘water in car’ or ‘take my own.’ But C-Store use is still on-par with fast food and fast casual.

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Purchase likelihood – foodservice (2014/2015) How likely are you to purchase the following food items at a: 5.0

1=Strongly Disagree / 5=Strongly Agree

4.5 4.0 3.5 3.0

2.9 2.6

2.8

2.6

2.5

2.8

2.5

2.0

Convenience Store 2014 Convenience Store 2015

1.5 1.0 0.5 0.0 Food prepared on site

Cold, packaged food

Hot, packaged food

Small decreases in likelihood but the bigger issue here is low scores in general for two years straight. Reasonable goal: 2016 numbers all above 3.0.

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Purchase likelihood – foodservice (2015) How likely are you to purchase the following food items at a: 5.0 4.3

1=Strongly Disagree / 5=Strongly Agree

4.5 4.0

3.6

3.5 3.0

4.46

2.6

3.5

2.6

2.8

3.1

2.96

2.5

3.2

3.11

2.5

Convenience Store Grocery Store Fast Food QSR

2.0

Fast Casual

1.5 1.0 0.5 0.0 Food prepared on site

Cold, packaged food

Hot, packaged food

There is an opportunity for convenience stores to ‘tell the story’ better to increase likelihood of purchase of these items and increased C-Store share vs. competitors.

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Let’s See What Others are Doing

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Quality (explicit)

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Quality (inferred)

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Customization, ‘all about me’

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Exciting flavors & forms

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Transparency

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Creating excitement about the brand

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All hours

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General purchase likelihood – foodservice (2014) How likely are you to purchase the following food items at a: 5.0

1=Strongly Disagree / 5=Strongly Agree

4.5 4.0

4.0 3.5

3.3

3.3

3.0 Convenience Store

2.5

Grocery Store

2.0

Fast Food QSR

1.5 1.0 0.5

[VALUE][VALUE][VALUE]

[VALUE][VALUE][VALUE]

Baked goods, non-traditional (churros, sweet poppables, savories)

Frozen (yogurt, ice cream, sundaes)

0.0 Baked goods, traditional

Potential product growth areas in non-traditional baked goods and frozen items. Both are strong focal areas for QSR and fast casual.

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General purchase likelihood – foodservice (2015) How likely are you to purchase the following food items at a: 5.0

1=Strongly Disagree / 5=Strongly Agree

4.5 [VALUE]

4.0 3.5 3.0

3.1

3.1

3.2

3.44 3.03 [VALUE] [VALUE]

2.5

[VALUE] [VALUE] 2.89 [VALUE]

Convenience Store Grocery Store

2.0

Fast Food QSR

1.5

Fast Casual

1.0 0.5 0.0 Baked goods, traditional

Non-traditional baked goods (churros, sweet bite-sized items, savory bite-sized items)

Frozen (yogurt, ice cream, sundaes)

The numbers for traditional baked good are holding, but there is opportunity to increase purchase likelihood in the two new categories added in 2015. Nontraditional baked goods is an especially hot area for QSR right now.

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Related trends we are seeing • Convenience driven consumers • Busy, on-the-go consumers • Ease of eating, different form/function • 1-handed eating a critical skill!

• From supersizing to size- and/or shape-shifting • Poppables, alternative forms • Smaller treats = ‘healthier’ (relatively speaking!) • But poppable does not necessarily = ‘eating less’

• Storytelling • Brand personality • Transparency • Processes and value added methods

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Prepared food preferences When purchasing food that is ready to eat, I prefer to: Eat in my car

2.95 2.9 2.9

Grab a prepackaged food item

3.0 3.2

Buy cold foods

3.5

Order at the counter and eat there (dine-in)

3.8 3.8

Order prepared food that is packaged for me/served when I…

2014 2015

3.75

Get takeout food from ordering at a counter

3.8 3.8

Get takeout food from a drive-through window

3.8 3.7

Buy hot foods

4.2 4.3

Customize the food that is being prepared

4.2 4.3

Have the food prepared for me while I wait

4.2 4.3

0.0

1.0

2.0

3.0

4.0

5.0

1=Strongly Disagree / 5=Strongly Agree

Strongest preferences for hot foods vs. cold, customization and food that is prepared in front of the customer. Strong customer emphasis on control is evident (the ‘Subway effect,’ among others).

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Related trends we are seeing • Customization & control • Value • Expected

• The car issue & portability • 1-handed dining is part of 4 (or 5!)-handed driving • Other key considerations: • Mess • Logical, intuitive packaging • Consistent condiments

• Share-ability

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Portability & car food (traditional approach)

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Portability & car food (extreme approach!)

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Foods purchased past 60 days (2015) I have purchased ______ at a convenience store in the past 60 days: 80.00% 70.00% 60.00% 50.00% 40.00%

27.89% 25.71%

30.00% 20.00%

27.46%

30%

18.21%

17.16%

Pizza

Salad (packaged)

20.84%

10.00% 11.54%

18.86%

23.69%

0.00% Hamburgers

Hot dogs/sausages Yes & I will purchase again

Prepackaged sandwiches

No, but I would consider purchasing

Hamburgers have the lowest incidence of use or consideration out of the 5 food types. This is an area where customers may not give convenience stores license to play in.

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Foods purchased past 60 days (2015) - 2 I have purchased ______ at a convenience store in the past 60 days: 80.00% 70.00% 60.00% 50.00% 40.00% 30.00%

26.91%

20.00% 10.00%

28.70%

28.31%

16.89%

17.92%

Rolled foods

Side dishes

27.03%

13.60%

10.36%

Fried chicken

Wings (BBQ/Buffalo)

0.00%

Yes & I will purchase again

No, but I would consider purchasing

While usage is low, consideration for these items are positive.

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Foods purchased past 60 days (2015) - 3 I have purchased ______ at a convenience store in the past 60 days: 80.00% 70.00% 60.00% 27.25%

19.37%

50.00%

37.91%

40.00% 30.00% 20.00%

41.77%

46.94% 28.36%

10.00% 0.00% Donuts/Pastries Yes & I will purchase again

Coffee

Fresh-made sandwiches prepared in front of me)

No, but I would consider purchasing

By far the most positive of the food categories—which should come as no surprise. But there is work to be done to increase scores for all other foods in the coming years.

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Other data • Quality of sandwiches at convenience stores • Food & drink purchase at convenience store? • 50/50 split ‘yes/no’

• 36% of respondents purchased food from QSR and a drink from a convenience store (past 60)

• Low satisfaction with ‘satisfying’ foods • Opportunity for craveable foods

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Additional implications from the data • Clear opportunity to grow share of visits by focusing on a ‘meal.’ • But be mindful that a ‘meal’ can mean very different things

• Snacking is a growth area where convenience stores are winning— capitalize on this by new and exciting products.

• Tap into QSR, supermarket approach by offering LTO’s. • Grocery too! Publix and the NFL

• Explore new, different ways to deliver ‘customizable foods’ and ‘control’ to the foodservice customer.

• Tell the story of the brand and its food. • Ask your customers what they want! • The best time to fix the roof is before it’s on fire. 43

Questions?

Thank you!

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Joshua Tahan – Associate Research Consultant [email protected]

www.StudyHallResearch.com 813.849.4255

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